The increase in foreign direct investment (FDI) in defence sector to 74 per cent will encourage multinationals to set up manufacturing bases in India or acquire local companies but will hit hard the local companies who do not have any access to technology or government orders.

“Without giving an opportunity to the Indian private sector, the government has offered Indian contracts on a silver platter to foreign companies”, said the head of an Indian defence company on the condition of anonymity.

“The government had announced Make in India six years ago but since then no major defence contracts went to Indian companies, which is a sad commentary,” he said.

CEOs of local companies said that the government should have first given contracts to Indian companies and allowed them to source appropriate technology partners and also bring in FDI. “This would have served the national interest and very objective of the government. The government must make it mandatory for foreign companies to make in India,” he suggested.

India gives orders worth $100 billion a year for defence procurement, making it one of the world’s lucrative markets for defence companies. Net FDI inflows grew 14.2 per cent in 2018-19. The top sectors attracting FDI equity inflows are services, automobiles and chemicals.